Gold Losing Its Luster

Gold bugs, take note: The precious metal may be losing its status as a safe-haven investment.

Gold prices have tumbled below $1600 in recent days, busting out of the $1600 to $1700 range the metal had been stuck in for much of 2012.

Market participants love to point to the similarities between asset classes this year and last, especially as markets recently have been getting whipsawed off of European headlines. The one key difference , though, is gold.

Prices kept going up last year as stocks and commodities tumbled when investors were fretting about the European debt crisis. But now, gold is starting to lose its appeal.

“Gold is now behaving like a risky asset,” says Julian Jessop, chief global economist at Capital Economics. “This can be seen in the unusually high positive correlation between daily changes in the prices of gold and European equities.”

He points out how gold has typically had a negative correlation during periods of turmoil. So what gives this time around? From Jessop: